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Monday, November 12, 2012

Constitutional Challenge to Fair Credit Reporting Act Rejected

In the wake of the Supreme Court's decision last year inSorrell v. IMS Health, there's been a lot of speculation about the extent to which previously accepted commercial speech regulation may now be subject to "heightened" or strict scrutiny under the First Amendment. Sensing an opportunity, lawyers who regularly represent consumer reporting agencies invoked Sorrell in their defense of a suit under the Fair Credit Reporting Act, arguing that a provision of that 40-year-old statute violates the First Amendment.

In King v. General Information Services, plaintiff Shamara King claims that when she applied for a job with the U.S. Postal Service, defendant GIS prepared a background-check report in connection with her employment application that
included details about a past car theft arrest. Including that information in the report violated the FCRA, which forbids consumer reporting agencies from reporting adverse
information (except for a criminal conviction) that “antedates the
report by more than seven years.” 15 U.S.C. 1681c.

GIS's brief argued that the FCRA provision is a “content- and speaker-based restriction on speech,” because it prohibits only credit reporting agencies, and nobody else, from reporting this type of truthful, public information. "Sorrell," according to GIS, "marks a dramatic shift in the protection afforded to content- and speaker-based restrictions on truthful commercial information. ... [I]ts holding has sweeping effects on many other laws restricting disclosure of commercial information, including FCRA."

Not so fast. Last week, Judge Petrese Tucker of the U.S. District Court in Philadelphia soundly rejected this constitutional challenge and, with it, the notion that Sorrell marks a sea change in the law of commercial speech. The appropriate standard, she concluded, is not strict scrutiny but rather the intermediate scrutiny ordinarily applied to commercial speech regulation under the Central Hudson test. Applying that test, she concluded that the chalenged FCRA provision directly advances Congress's goal of balancing consumer privacy with the need for credit reporting in a way that is no more extensive than necessary. The court's analysis closely tracks arguments made in the brief filed by the United States. Congratulations to my former CFPB colleagues Kristin Bateman and David Gossett, who worked on the government's brief along with lawyers from the Justice Department and the FTC, and to consumer advocate Jim Francis, who represents Ms. King in this case.